Exhibit 10.4(c)
XXXX XXXXX
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made and entered into
between XXXX XXXXX ("XxXxx") and THE MIDLAND COMPANY ( "Midland").
W I T N E S S E T H:
Midland desires to engage XxXxx to render the consulting services
subject to the terms and conditions of this Agreement because of XxXxx'x
valuable experience in operating the business. XxXxx is willing to perform
such consulting services for the fees and upon and subject to the terms and
conditions set forth in this Agreement. Accordingly, Midland and XxXxx agree
as follows:
1. Term. The term of this Agreement (the "Term") shall be for a
period of four (4) years commencing on January 1, 1999 and expiring on December
31, 2002 (the "Expiration Date").
2. Consulting Services. During the term of this Agreement, XxXxx'x
duties include, at the request of Midland: (a) consulting with officers of
Midland during regular business hours, and (b) promoting the good will of
Midland by being available to attend and attending insurance-related conferences
and functions as a representative of Midland. XxXxx shall devote only such time
and attention to the business of Midland as may be reasonably necessary to
perform his duties under this Agreement, up to a maximum of twenty (20) hours
per month.
3. Consulting Fees.
a. Fee. In consideration of the consulting services to be
performed by XxXxx, Midland agrees to pay to XxXxx the following annual amounts:
Year Consulting
------ ------------
1999 $150,000
2000 $120,000
2001 $ 90,000
2002 $ 60,000
Midland shall pay such amounts in equal monthly installments on or before the
fifteenth (15th) of each month.
b. Other Consideration. XxXxx shall receive additional
consideration as follows:
i. Midland shall continue to pay its share of the
premiums (or $277,420 per year) under the Split Dollar Life
Insurance on the lives of XxXxx and his spouse until the death
of the survivor, provided, however, (x) Midland shall only be
obligated to pay such premiums for a period of ten (10) years,
(y) Midland may, at any time after the sixteenth (16th)
anniversary date of the policy, request a return of all premiums
Midland paid into the policy and (z) Midland may also take
advantage of any premium reduction or minimum payment options
under such policy provided Midland pays the equivalent of the
sum of $277,420 for ten (10) years with such sum reduced by any
special dividends, demutualization distributions or other policy
distributions.
ii. The Midland Health Insurance Plan shall be
available at normal employee rates during the Term and after the
Term. XxXxx'x coverage shall be secondary to Medicare after he
reaches age 65, and XxXxx'x spouse shall be covered until she
reaches age 65 at which time her coverage shall be secondary to
Medicare;
iii. During the Term, a car shall be provided by
Midland consistent with the program in effect at the
commencement of this Agreement;
iv. Use of the Midland plane shall be available
secondary to Midland's business use during the Term;
v. During the Term, Midland shall continue to pay
club dues for the clubs XxXxx was a member (and Midland was
paying such dues for such clubs) at the commencement date of
this Agreement;
vi. No director fees shall be paid during the Term;
vii. Any existing stock options or stock grants of
XxXxx may be exercised at the earlier of the normal expiration
date during the Term or for a period of three (3) years after
the later of (x) the Expiration Date of this Agreement or (y)
the date of retirement of XxXxx as a member of the Board of
Directors. Any future awards while a director during (or after
the Term) will be equal to the stock awards of an outside
director;
viii. Midland shall provide XxXxx with an office in
headquarters building during the Term;
ix. During the Term, Midland shall provide payment
for XxXxx'x estate planning and annual tax preparation
consistent with the current level of fees that were being paid
at the commencement date of this Agreement; and
x. On April 1, 2001, Midland shall provide for the
payment in a single lump sum of the actuarial equivalent of
XxXxx'x benefit from The Midland Company Supplemental Retirement
Plan, and an additional payment equal to 45.6% of the benefit to
provide for the payment of any federal, state and local income
tax due on the payment of the benefit.
4. Proprietary Property; Confidential Information. For purposes of
this Agreement, the following definition shall be used:
a. Proprietary Property. The term "Proprietary Property"
includes any and all ideas, creations, developments, improvements, inventions,
trade secrets, patents, copyrights, trademarks, trade names, logos, processes,
computer programs, databases, spread sheets, documentation, models,
methodologies, strategies, material works or authorship, know-how and methods of
applying and putting into practice any such items that are created, developed or
discovered by or for Midland or are acquired or licensed on a proprietary
technical information generally known in the business in which Midland operates,
even if disclosed to XxXxx or known or developed by XxXxx as a consequence of
or through XxXxx'x performance of services under this Agreement.
b. Confidential Information. The term "Confidential
Information" includes any and all information which relates to Midland's
products and services (including their development, marketing and sale), the
financial, marketing and other aspects of Midland's operations, and the
intellectual property and business and other rights which it owns, licenses or
otherwise has the right to use, which is not generally known outside Midland
(other than to Midland's customers or suppliers or other third parties in
connection with their business with Midland) and which is disclosed or
accessible to or known or developed by XxXxx as a consequence of or through
XxXxx'x performance of services hereunder or prior performance of services for
Midland. It includes, but is not limited to, memoranda, files, books and
records, financial and accounting methodologies, catalogs, lists of customers or
prospects, price lists, advertising and promotional materials, packaging design,
business plans, operating policies and manuals, internal controls, policies,
procedures and guidelines, and other business information and records used in
the conduct of business (whether intangible - including written documents,
magnetic tapes, disks or other media - or intangible form), agreements and
understandings between Midland and third parties, and trade secrets, software
and other licenses, source codes and object codes, designs, drawings, plans and
other such information and rights, intangible or otherwise, whether or not such
information comes within the term "Proprietary Property".
c. Rights to Proprietary Property. XxXxx agrees that,
except as Midland may otherwise expressly agree in writing, (i) XxXxx shall have
no rights and shall acquire no rights to any Proprietary Property that comes, or
has come, within XxXxx'x knowledge or possession through or as a consequence of
XxXxx'x performance of services hereunder or prior to the effective time of this
Agreement, and (ii) any information or other property that is, or has been,
invented, created, discovered, written, developed, furnished or produced by
XxXxx, solely or jointly, wholly or partly, while performing services for
Midland hereunder or prior to the effective time of this Agreement or with
information proprietary to Midland (the "Developments"), shall be the exclusive
property of Midland, and XxXxx shall have no right, title or interest of any
kind in and to the Developments, including any results or proceeds therefrom.
XxXxx hereby sells, transfers and assigns to Midland all right, title and
interest which XxXxx may be deemed to have in and to the Developments, including
the right to patent, register copyrights for or obtain legal protection for the
Developments, and agrees to communicate promptly and disclose to Midland, in
such from as Midland requests, all information, details and data pertaining to
any Developments. At any time during or subsequent to the term of this
Agreement, upon the request and at the election and expense of Midland, XxXxx
will patent, register copyrights for or obtain other legal protection for, or
permit Midland to patent, register copyrights for or obtain other legal
protection for, any Developments and execute any and all assignments,
instruments of transfer, or other documents that Midland deems necessary or
appropriate to transfer to Midland all rights in or to the Developments or to
evidence Midland's ownership of such rights or any of them.
d. Use and Disclosure. Except as may be otherwise
expressly authorized in writing by Midland, XxXxx shall not use any Proprietary
Property or Confidential Information except for the benefit of Midland and
shall not disclose any Confidential Information to any other person. As used in
this Agreement, unless the context otherwise requires the term "person"
includes, but is not limited to, any individual, partnership, association, firm,
corporation, trust, unincorporated organization, joint venture or other entity.
This restriction on use and disclosure applies without limitation as to time or
place.
e. Applicability to Midland and its Affiliates. For
purposes of this Section 4, and Sections 5, 6 and 7 of this Agreement,
references to Midland shall be deemed to include Midland and any corporations or
other business entities affiliated with it.
5. Midland Property. Following the Expiration Date of this
Agreement, XxXxx shall promptly return to Midland all property of Midland in
the possession or control of XxXxx (and any and all copies thereof) including,
without limitation, all Proprietary Property and Confidential Information.
6. Non-Competition. During the period commencing on the date of
this Agreement and ending five (5) years after the expiration of this Agreement
(the "Restricted Period"), XxXxx shall not, either on XxXxx'x own account or for
any other person or entity, directly or indirectly, (a) engage in any activities
or render any services which are similar or reasonably related to those
performed for or rendered to or on behalf of Midland during the term of this
Agreement or the two-year period preceding the date of this Agreement (together,
the "Extended Term"), to any business which competes with Midland in any place
where Midland is engaged or, to the knowledge of XxXxx, intends to engage in
business or (b) owns a greater than five percent equity interest in or be
connected with the management, operation or control of any such business, but
the foregoing shall not be deemed to exclude XxXxx from acting as a director,
officer or employee of or a consultant to other business for the benefit of
Midland with the consent of Midland's Board of Directors.
7. Non-Solicitation. During the Restricted Period, XxXxx shall not
directly or indirectly: (a) attempt to induce, or assist others to attempt to
induce, any person who was or was actively negotiating to become a customer of
Midland at any time during the Extended Term, to reduce or terminate such
customer's business with Midland or to direct any of its business that is then
being or may be done with Midland to any other person; (b) attempt to induce, or
assist others to attempt to induce, any employee of Midland to terminate his or
her employment with Midland; and (c) whether in an individual capacity or as the
owner, partner, employee or agent of any entity, employ or offer employment to
any person who is or was employed by Midland during the Extended Term unless
such person shall cease to have been employed by Midland in any capacity for a
period of at least one year.
8. Survival. Sections 4, 5, 6, 7, 8 and 9 shall survive the
termination of this Agreement. In the event Midland is acquired or merges with
another entity, this Agreement shall survive unless otherwise agreed to in
writing by Midland and XxXxx.
9. Remedies for Breach of Agreement. If XxXxx commits a breach or
threatens to commit a breach of any of the provisions of this Agreement, Midland
shall have the right to have the provisions of this Agreement specifically
enforced by any court having equity jurisdiction without having to prove the
inadequacy of the available remedies at law or irreparable injury, it being
acknowledged and agreed to between Midland and XxXxx that any such breach or
threatened breach will cause irreparable injury to Midland and that money
damages may not provide an adequate remedy to Midland. In addition, Midland may
take and pursue all such other actions and remedies as may be available to
Midland at law or in equity and shall be entitled to such damages as Midland
can show Midland has sustained by reason of such breach, together with court
costs and attorneys' fees.
10. Expenses. Midland agrees to reimburse XxXxx for all his
reasonable out-of-pocket expenses incurred by XxXxx in connection with the
performance of the duties under this Agreement.
11. Title: Relationship of Parties. XxXxx may hold himself out as
a consultant to Midland. XxXxx is retained by Midland only for the purposes and
to the extent set forth in this Agreement, and XxXxx'x relation to Midland under
this Agreement shall be that of an independent contractor and not that of an
employee, partner or joint venturer. XxXxx acknowledges that he is solely
responsible for all withholding, social security and other taxes with respect
to the consulting fees paid to him under this Agreement.
12. Independent Judgment. Nothing in this Agreement shall be
construed to interfere with or otherwise affect the rendering of services by
XxXxx under this Agreement in accordance with XxXxx'x independent and
professional judgment and in accordance with XxXxx'x own means and mode of
performance.
13. Indemnity. Each party ("Indemnifying Party") agrees to
indemnify and hold harmless the other party (the "Injured Party") from and
against any damages, liabilities, actions, suits or other claims and from
reasonable attorneys' fees and costs incurred by the Injured Party in defending
against same with respect to the discharge of the Injured Party's duties and
responsibilities under this Agreement unless such liability arose out of the
Injured Party's gross negligence.
14. Rabbi Trusts. The obligations under this Agreement (i) shall
accelerate, (ii) shall be entirely funded upon a Change of Control, as defined
in the Consulting Agreements Rabbi Trust (the "Rabbi Trust"), through the Rabbi
Trust and as prescribed in Rev. Proc. 92-64, and (iii) shall be paid within
thirty (30) days of the effective date of the Change of Control. No other
provisions shall be made with respect to segregating assets of the Company for
payment of any distributions under this Agreement except as may be required by
the Rabbi Trust. The right of XxXxx or his designated beneficiary to receive a
distribution under this Agreement shall be an unsecured claim against the
general assets of Midland, and neither XxXxx nor a designated beneficiary shall
have any rights in or against any specific assets of Midland. All amounts to be
paid to fulfill the obligations under this Agreement shall constitute general
assets of Midland and may be disposed of by Midland at such time and for such
purposes as it may deem appropriate.
15. Tax Gross-Up Payment.
a. Amount of Payment. In the event of a Change of Control,
benefits under any plan or other agreement including this Agreement in which
XxXxx participates are accelerated and distributed prior to the time such
benefits would otherwise have been distributed under such plan, Midland shall
pay XxXxx the following additional amounts (the "Gross-Up Payment"):
i. The amount of the Excise Tax, if any, imposed on
XxXxx by Section 4999 of the Internal Revenue Code of 1986.
ii. The amount of any federal, state and local
income tax due to any payments to XxXxx under i above.
iii. After the payments are made in i and ii above,
an additional amount shall be paid to XxXxx grossing up all
payments made pursuant to this Section 16 such that the
additional amount paid is sufficient to pay the Excise Tax and
the federal, state and local income taxes being reimbursed in i
and ii above.
b. Calculation of Payment. For purposes of determining the
amount of the Gross-Up Payment payable pursuant to a above, Consultant shall be
deemed to pay (i) federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is made; and
(ii) state and local income taxes at the highest marginal rate of taxation in
the calendar year in which the Gross-Up Payment is made (but based on the rates
of taxation of the states and localities with respect to which the Gross-Up
Payment will be taxable), net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
c. Payment is an Estimate. The Gross-Up Payment provided
for in this Section 16 shall be an estimate. Midland will cause its independent
auditors to make an estimate of the liability and Gross-Up Payment within 60
days of the Change of Control (a copy of which is to be furnished to Consultant
as soon as possible), and Midland shall pay to Consultant the Gross-Up Payment
in cash in a lump sum within 30 days of such estimate. In the event that the
amount of the estimated Excise Tax and other tax liability exceeds the amount of
the actual Excise Tax and other tax liability, Consultant shall promptly repay
the portion of the Gross-Up Payment attributable to the reduced Excise Tax and
other tax liability, and such excess shall constitute a loan by Midland to
Consultant, payable on the 5th day after demand by Midland (together with
interest from the date Consultant received the Gross-Up Payment at the rate
provided in Section 1274(b)(2)(B) of the Code).
d. Subsequent IRS Review. In the event the Internal
Revenue Service subsequently makes a determination resulting in an Excise Tax
and other tax liability in excess of the estimate as determined by Midland's
auditors, Consultant shall promptly notify Midland, and Midland shall have the
right at its expense, to contest and participate. If any additional Excise Tax
and other tax liability is assessed in respect of Consultant by the Internal
Revenue Service, such additional Excise Tax and other tax liability, plus any
penalties and interest assessed, shall be paid to Consultant by Midland
(together with an amount sufficient for all other federal, state and local taxes
on the additional Excise Tax and the payments provided for in this Section 16)
within 10 days of the date that the Internal Revenue Service makes such an
assessment.
e. Interpretation. The interpretation of matters relating
to the Gross-Up Payment shall be made by tax counsel selected by Midland's
independent auditors and acceptable to Consultant.
16. Entire Agreement. This Agreement supersedes any and all other
understandings and agreements, either oral or in writing, between Midland and
XxXxx with respect to the subject matter of this Agreement and constitutes the
sole and only agreement between Midland and XxXxx with respect to the subject
matter. No change or modification of this agreement shall be valid or binding
upon Midland and XxXxx unless the change or modification is in writing and
signed by Midland and XxXxx.
17. Legal Construction. If any provision of this Agreement shall be
found by any court of competent jurisdiction to be invalid or unenforceable for
any reason, such invalid or unenforceable provisions shall not affect the
validity or enforceability of the remaining provisions of this Agreement which
shall remain in full force and effect.
18. Parties Bound. This Agreement shall be binding upon and shall
inure to the benefit of Midland and XxXxx and their respective successors and
assigns. XxXxx shall not assign any of its rights under this Agreement without
the prior written consent of Midland. Midland shall not assign any of its
rights under this Agreement to any person or entity without the prior written
consent of XxXxx.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same agreement.
20. Governing Law. This Agreement shall be governed by, construed
under, and enforced in accordance with the laws of the State of Ohio.
21. Headings; Gender; Number. The headings contained in this
Agreement are for convenience only and shall not be construed as substantive
provisions of this Agreement. Singular words shall include the plural and
plural words shall include the singular, unless the context requires otherwise.
22. Other Activities. XxXxx may get involved in other activities
which do not materially interfere from a time standpoint with the duties of
XxXxx hereunder.
23. Effective Date. This Consulting Agreement shall be dated as of
July 1, 2000, to be effective as of the first day of the Term of this Agreement.
This Agreement restates and thereby supersedes any Consulting Agreement
previously executed by the parties, and the parties agree that any prior
Consulting Agreement shall be of no further effect.
/s/ Xxxx XxXxx
Xxxx XxXxx
The Midland Company
By: /s/Xxxx X. Xxx Xxxxxx
Its: Executive Vice President
